Fitch Affirms Nationwide Financial Services & Operating Subs.

CHICAGO -- Fitch Ratings affirmed the following ratings of Nationwide Financial Services (NFS):

-- Senior debt rating 'A-';

-- Trust preferred rating 'BBB+'.

In addition, the insurer financial strength rating and commercial paper rating of Nationwide Life Insurance Co. (NLIC) are affirmed at 'AA-' and 'F1' by Fitch. Nationwide Life Insurance Co. of America's insurer financial strength was affirmed at 'AA-'. The Rating Outlook is Stable.

NFS is a life insurance holding company that is 63% owned by Nationwide Mutual Insurance Company (Nationwide Mutual), one of the largest property/casualty companies in the U.S. Although not wholly owned, Fitch considers NFS to be a strategic operation for Nationwide Mutual due to NFS' relative capital size and earnings contribution to the overall organization. Importantly, from a rating perspective, Nationwide Mutual, as the larger operation does exert influence on the ratings at NFS.

Fitch's ratings on Nationwide Financial Services, Inc. (NFS) reflect the company's good competitive position in the variable annuity market, conservative financial leverage and solid earnings-based interest coverage, and a high quality investment portfolio. Partially offsetting these positives are the effects of intense competition in the company's chosen markets, the sensitivity of the company's results to the equity market, and the mortgage-backed security (MBS) and commercial mortgage concentration in the investment portfolio.

As an asset acquirer in the highly competitive retirement market, NFS has many elements needed to succeed long term: mass, name-brand recognition, and diverse sources of quality distribution. A significant percentage of NFS retirement assets are in tax-sheltered products, which traditionally aids retention. However, Fitch believes this market will continue to be competitive and that price, product feature, and distribution will continue to be important components for future operating earnings.

Fitch believes that NFS uses financial leverage conservatively and that management's long-term financial leverage target of 25% is reasonable for the current ratings. The company's debt plus preferred-to-capital ratio of 21% and its interest and fixed-charge coverage of more than 7 times (x) are viewed by Fitch as solid and consistent with the rating category.

NLIC has an $800 million commercial paper (CP) program and had $214 million outstanding under the CP program as of Sept. 30, 2004. The CP rating is supported by NLIC's access to a $1 billion revolving bank facility along with its immediate parent NFS and ultimate parent Nationwide Mutual Insurance Co. The facility provides for several and not joint liability, and the available amount of the line is reduced by 50% of any commercial paper issuances outstanding.

NFS' investment portfolio is high quality and has performed well. However, the company has a very large exposure to the real estate market, primarily through commercial mortgages and MBS. Although this investment concentration is a concern, it is somewhat offset by an under-allocation to equity securities.

NFS offers a variety of minimum guaranteed death benefits (GMDB) on its variable annuity product offerings. Fitch believes that the structure of the GMDBs is not overly aggressive and that the company is correctly protecting itself versus this risk through a combination of reinsurance and hedging. The net amount at risk on GMDB features was $494 million as of Sept. 30, 2004, a figure that is highly sensitive to the equity markets and has declined significantly over the recent past.

The following ratings are affirmed with a Stable Rating Outlook by Fitch.

Nationwide Financial Services Inc.

-- Long-term issuer 'A-';

-- Senior notes $300 million; 8.00%; due March 1, 2027 'A-';

-- Senior notes $300 million; 6.25%; due Nov. 15, 2011 'A-';

-- Senior notes $300 million; 5.90%; due July 1, 2012 'A-';

-- Senior notes $200 million; 5.625%; due Feb. 13, 2015 'A-';

-- Trust preferred $100 million; 7.899%; due March 1, 1037 'BBB+';

-- Trust preferred $200 million; 7.10%; due Oct. 31, 2028 'BBB+'.

Nationwide Life Insurance Co.

-- Insurer financial strength 'AA-';

-- Commercial paper 'F1'.

Nationwide Life Insurance Co. of America

-- Insurer financial strength 'AA-'.